USA administration backs off on Trump's Saudi oil production tweet

Gladys Abbott
July 1, 2018

If so, such a boost would be significant for the country's oil production, which hit 10.03 million barrels per day (bpd) in May.

A statement on the state-run Saudi Press Agency on Saturday afternoon said: "During the call, the two leaders stressed the need to make efforts to maintain the stability of oil markets and the growth of the global economy".

Investors are betting Saudi Arabia has little room to respond to a future crisis should it boost output even more to meet Trump's request, as Saudi Arabia only has about 2 million barrels of unused capacity, according to International Energy Agency. He questioned whether Trump's words would do anything to reverse the effects on the market of declining Iranian oil production.

That has led Democrats to lay the blame on the White House, highlighting Trump's decision to pull the United States out of the Iran nuclear deal as a factor in the tightening global oil supply.

Continuing increases came despite the decision last week by OPEC and its allies to increase production by as much as 1 million barrels per day.

Saudi Arabia's King Salman bin Abdulaziz Al Saud talks during the opening of 29th Arab Summit in Dhahran, Saudi Arabia April 15, 2018.

FGE, an energy consultancy, said in its June newsletter that the United States is determined to "push Iran's exports to zero".

"Saudi Arabia does not really like going beyond 11 million barrels a day and has no intention of expanding its current production capacity".

Saudi Arabia has a maximum sustainable capacity of 12 million bpd, but the world's top oil exporter and Organization of Petroleum Exporting Country's biggest producer has never tested that high level of production.

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U.S. President Donald Trump has faulted the rising global oil prices, calling on Saudi Arabia to jerk up production to crash the high prices.

The Opec oil producers' group agreed to increase output, as did Russian Federation, but this failed to reassure markets. Oil prices also have risen with the ongoing unrest in Venezuela, as well as with fighting in Libya over control of that country's oil infrastructure.

USA officials are pressing allies in Europe, Asia and the Middle East to adhere to the sanctions, which are aimed at pressuring Iran to negotiate a follow-up agreement to halt its nuclear programs.

Washington said last week it was asking customers in Asia and Europe to reduce Iranian oil purchases to zero from November, and that it will not grant any waivers to sanctions. The State Department is now insisting that other countries stop importing Iranian oil - or face sanctions from Washington.

Meanwhile, Iran's Supreme Leader Ayatollah Ali Khamenei on Saturday accused the U.S. of trying to turn Iranians against their government. "Prices to high! He has agreed!"

"They bring to bear economic pressure to separate the nation from the system ... but six US presidents before him tried this and had to give up", Khamenei was quoted as saying on Saturday by his website Khamenei.ir, referring to Trump.

OPEC and non-OPEC countries said they would raise supply by returning to 100 percent compliance with previously agreed output cuts, after months of underproduction.

The Trump administration has been counting on Saudi Arabia and other OPEC members to supply enough oil to offset the lost Iranian exports and prevent oil prices from rising sharply.

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